Banking

Banking could not properly develop before the invention of coins. At first, temples such as that of Artemis at Ephesus effectively had regional monopolies on banking, storing valuables and providing loans. Between 433 and 427 BC the temple of Athena at Athens lent the eiry-state finance at an interest rate of 6 percent.

In the Classical period much of the banking trade was taken over by private individual bankers (trapezitat), many of whom were money changers, operating at temples and markets. Such bankers were usually metics. In addition to changing money, they held deposits and provided loans. Often banking was an adjunct to other business. Pasion (died 370 BC) was a famous banker in Athens who also had a flourishing shield manufacturing business. Bankers took cash deposits, on which interest was paid, and provided safekeeping for valuables, mainly for merchants in foreign cities.

Most citizens kept their wealth hidden at home rather than at a bank. Loans were made to individuals (but apparently not to the state) for various commercial ventures, such as mortgages, and as a form of shipping insurance called bottomry loans. These loans had a high rate of interest and were repayable only if the voyage was successful, but not if the ship or cargo was lost through accident. The terms of such loans were set out in a written contract, and interest rates varied according to the particular voyage. For example, in the 4th century BC the interest on a bottomry loan for a voyage from Byzantium to Athens was about 10-12 percent, whereas from Athens to Pontus and back it was about 30 percent. There are a few recorded instances where other types of insurance were provided by banks.

Money changing (conversion from one currency to another) was a high-risk business, which appears to be one of the reasons why money changers took up banking, although banking also had its risks. A panic among depositors could cause a run on a bank, resulting in bankruptcy for the banker. Despite the rise of individual bankers, temples continued to operate as banks, some being controlled by city-states. Some cities established public banks which performed some of the functions of a private bank, but primarily handled the money from the city's taxes and spent it in accordance with the city's budget.

In Hellenistic times, temples, private banks and cities continued their banking businesses with little change, but in the region controlled by the Ptolemies a public banking system was created. A network of royal banks spread throughout Egypt, with a central bank at Alexandria. Branches in outlying areas were leased to private bankers under the control of the state bank.